Video: “The stimulus failed”

posted at 12:55 pm on June 7, 2010 by Ed Morrissey

Originally, I intended to just clip out the statement from Keynesian economist Jeffrey Sachs that “the stimulus failed,” which Joe Scarborough had to dig to get, but the entire segment is worth viewing. First, Sachs confirms — on MS-NBC, no less — that the Obama administration and Democrats in Congress had no strategy for long-term growth. The stimulus was a collection of short-term minor stimuli, combined with liberal hobby horses that Democrats had ridden for twenty years. Scarborough tries to defend Keynesianism from the Keynesians, but the failure can’t be separated from the philosophy:

For objective observers the failure of President Obama’s $862 billion stimulus has become increasingly difficult to deny. But not for the White House. Last week, Vice President Joe Biden told Charlie Rose on PBS that the stimulus was “an absolute success.” Betraying a common perception about unemployment, Biden told Rose: “[W]e lost 8 million brand new jobs … since … 8 million brand new jobs since we hit the skids. On top of the 6% that were already unemployed. It took us several years to get there, it is going to take several years to get back to that number.” That is not quite true. In fact, the American economy has shed 55.4 million jobs since the recession began in the First Quarter of 2008. But at the same time the economy has only added 46.5 million jobs. Putting the two together produces the net approximate 8 million jobs lost that Biden referenced.

But isn’t net jobs all that really matters? Why should anyone care exactly how many jobs were lost and created since all that really matters is the net number of Americans who are no longer employed? Here’s why: despitean unemployment high of just 6.4%, more jobs were lost in the first seven quarters of the 2001 recession than were lost in the first seven quarters of this recession. How is that possible? How could job losses have been worse in 2001 but unemployment so much higher now? Weak job creation. The latest Bureau of Labor and Statistics data show that employers have created 8.6 million fewer new jobs this time around than they did almost a decade ago. Heritage Senior Labor Policy Analyst James Sherk estimates that lower job creation accounts for 65 percent of the recession’s decreased employment.

Our nation’s unemployment rate is hovering near 10% not because of record job losses, as Biden suggests, but because of record job non-creation. Private sector employers have gone on strike. Contrary to what the President’s economic wizards and New York Times columnists believe, massive government deficit spending does not stimulate job creation. President Obama does not have a secret vault of money he can just throw at the American people. The resources the government spends come from the economy. When the government increases spending, it crowds out the resources that business owners could have invested in their enterprises. Private investment falls sharply when government spending rises. According to Sherk, annual private fixed nonresidential investment has fallen by $327 billion since the recession started— a 19 percent drop. Less private investment means less hiring.

Scarborough gets it right when he says it’s all about the debt, and Porkulus just made our debt position even worse. The spending from Democrats over the last three-plus years had also made it worse. We’re approaching a debt level of 100% of GDP, and that portends disaster.

Sachs talks about improvisation in Obama’s Gulf strategy, but improvisation has been the rule all along. No one knows what they’re doing in this White House; they’re just spitballing to see what sticks.

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